Earnings Season Gets Underway – And The Return of Market Volatility

16 Apr

OK so it was unexpected how stable the markets were in Q1 2012, I expect it is hello again to volatility going forward.

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On the reporting side, almost a fifth of the S&P 500 report next week and these include some big blue chip companies and banks (IBM, Microsoft, Coca-Cola, McDonald’s, Citigroup and Bank of America). On the economic front, March retail sales, industrial production, existing home sales and weekly jobless claims.

The Good News – valuations seem to be supportive of the market

The Bad News – stocks fell for a second week, in the most volatile week of the year, punctuated by big swings in both directions.

I think this is the first time since possibly October last year, where we have seen been effected by the reality that stocks are typically volatile, despite low volatility in the first quarter. It’s possible we could see further losses with trend data indicating a growing potential of this being double what we’ve recently seen. This could become reality off of the weaker U.S. data; a slowdown in China, and the European debt saga becoming more threatening again.

The biggest uncertainty is the Eurozone. Europe has recently returned as a significant market worry with yields in Italy and Spain rising dramatically, amid expectations of weak economic data and growth and growing fiscal concerns. I think there are going to be more reported over the European scenario, as Spain issues bills on Tuesday and longer-dated securities Thursday; ECB (European Central Bank) President Mario Draghi speaks at the ECB statistics conference on Tuesday.

This is a challenging time but could also be very profitable as volatility creates opportunities.

Any questions – my email address is welshmoneywiz@virginmedia.com; or follow me on – twitter welshmoneywiz, linkedin Darren Nathan

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